Saturday, November 18, 2006

Dow Theory

The Dow theory is simple as can be - whither the transportation index there the Industrials. In other words one doesn't move without the other and if they do the earth stands still and everything that we know and love turns to ....

Not so. In general the tranny's and the indu's track together and play nice and as the following chart shows for the past two years that only two times on a global basis did they diverge - once briefly, box a, and once tremendously, box b.

I know, I know what you are saying to yourself right now - "where in the hell does he get such ugly colors," but seriously, can we be serious for a moment -

As shown in box a when the INDU's realized that the TRAN's were going up they rushed to catch up. But box b is most interesting because this was what was happening that many of the bobbleheads and blogheads (many instances same difference) were talking about this past summer - you know as the Dow was making a run at a new record how - "The trannies are crashing! The trannies are crashing! The world as we know it must come to an end." And it didn't.

Point being kiddies who're ya gonna trust - the bobbleheads or your own lying eyes?

Stop worrying about things like the Dow theory - it obviously doesn't work as some folks want it to. It might have used to done that back when buggy whips were all the rage but apparently in the age of microsoft it don't work that way so much no more. And despite the horrendous grammar - you get the point.

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About Me

I am a stock trader. I have chosen this profession because it suits my need to do analytical work for profit. Thus I am an analyst who trades for a living. It is fun even when taking a loss. I am forever seeking the next best idea. I intend to use this blog to share my ideas with you.